FARMERS’ GUIDETO APPLYING

FOR THE VALUE-ADDED

PRODUCERGRANT PROGRAM

Fiscal Year 2016 Cycle

The Value-Added Producer Grant program provides grants, awarded on a competitive basis, to individual independent agricultural producers, groups of independent producers, producer-controlled entities, organizations representing agricultural producers, and farmer or rancher cooperatives to create or develop value-added producer-owned businesses. Priority is given to projects that increase opportunities for small and mid-sized family farms, and/or for beginning, veteran, and socially disadvantaged farmers and ranchers.

The term “value-added” includes: an agricultural commodity or product that has (a) undergone a change in physical state, (b) was produced, marketed, or segregated (i.e., identity-preserved, eco-labeling) in a manner that enhances its value or expands the customer base of the product, or (c) is aggregated and marketed as a locally-produced food. Grants may be used to:

• Engage in economic planning to develop business plans and feasibility studies (including marketing plans) needed to establish viable marketing opportunities for value-added products; or

• Acquire working capital to operate a value-added business venture.

Matching Funds RequirementAll grant funds must be matched on a 1:1 basis. Matching funds may be in the form of cash or eligible in-kind contributions. Up to 25 percent of the total project cost, or in other words, up to 50 percent of the match, may come from the farmers’ own time and effort (sometimes referred to as “sweat equity”) put into the project.

SPECIAL APPLICATION OPTIONS

Simplified ApplicationUSDA offers a simplified application form for working capital projects requesting less than $50,000. Many of the smaller grants are single farmer projects for which larger-scale working capital applications are unnecessarily complex. If you are applying for working capital under the simplified application, you are not required to provide an independent feasibility study or business plan.

PROGRAM BASICS

• Examples of Eligible Projects

• Program Priorities

• Application Scoring Guide

• Application Timeline

• Application Checklist

• VAPG and the 2014 Farm Bill Changes

• Additional Resources

On April 8, 2016, USDA published a notice in the Federal Register that they are accepting Value-Added Producer Grant proposals from farmers for the 2016

grant cycle. Up to $44 million in funding is available nationwide.

DEADLINESOnline at Grants.gov – Midnight EST, June 24, 2016

Mail or in person – Dropped off or postmarked by July 1, 2016

Fiscal Year 2016 Grant Cycle

Published April 2016

Agricultural Producer Eligibility Agricultural producers eligible for the program include farmers, ranchers, and harvesters, including loggers and fishers. The applicant producer(s) must supply the majority (more than fifty percent) of the commodity needed for the project and demonstrate the project will expand the customer base and increase revenues.

An agricultural producer group, a farmer or rancher cooperative, or a majority-controlled producer-based business venture applicant must demonstrate that it is entering an emerging market it has not served for

more than 2 years. Businesses with majority farmer ownership are eligible but cannot make up more than 10 percent of total awarded funds.

Eligible Activities

Commodity Processing

Market Differentiation

Commodity Segregation

On-Farm Renewable Energy

Local Food

Mid-Tier Value Chain

Description

Increasing value by changing the commodity’s physical state

Increasing value by marketing the commodity’s special identity or character

Increasing value by keeping the commodity physically

separated in production and distribution

Realizing value by transforming natural resources into energy on the farmstead

Increasing value by aggregating and marketing food for local markets

Increasing value by linking farmers with local / regional supply networks in which they are equal partners

Example Outputs

Flour, cheese, wine, jam, oils, yogurt

Organic, grass-fed, humane,

state branding

GMO-free, no-rBGH, varietal purity

On-farm biodiesel, on-farm electricity generation from on-farm sources

Buy local / buy fresh, community-based food enterprises, supplying local procurement

preferences

Farm to institution, farm to food service or restaurant, value chain using a consumer seal

or farmer identity-preserved label

Commodity Processing

Market Differentiation

Commodity Segregation

On-Farm Renewable Energy

Local Food

Mid-Tier Value Chain

Ludwig Farmstead Creamery in Fithian, IL received a working-capital grant to assist production and marketing of their artisan cheeses made with milk from their Holstein herd. Ludwig Creamery markets most of their products direct to

consumers through farmers markets, restaurants, retail outlets and wineries in Illinois and Indiana.

Stonewood Farm in Orwell, VT received a grant to expand its farm identity preserved value-added product line by purchasing materials that are necessary to package and brand their sausage products. It has supported their ability to

make ground turkey sausages and market them in the winter when it’s too cold to raise turkeys in Vermont. 90 percent of their products are sold in Vermont.

World Food Processing in Oskaloosa, IA received a working capital grant to assist in the expansion of their production and marketing of new, high quality, non-GMO food grade soybeans into three markets previously untapped by WFP.

A farm in central Pennsylvania received a grant to purchase supplemental soybeans that, combined with on-farm produced soybeans, is turned into expeller soybean meal and a high quality vegetable oil for use as on-farm fuel to

generate power and increase electrical efficiency.

Southern Plains Agricultural Resources Coalition in Oklahoma received a grant for the processing of no-till wheat into flour, and marketing the flour to public schools in OK.

The Wisconsin-based Fifth Season Cooperative, which includes representatives of the entire food chain, from producers to processors to institutional buyers in the tri-state Wisconsin, Iowa, and Minnesota area, used its award to support

custom processing of quick frozen vegetable blends for institutional markets.

PROJECT ELIGIBILITY AND EXAMPLES OF PREVIOUSLY AWARDED PROJECTS

National Sustainable Agriculture Coalition

Simplified Application (continued)You are required to discuss how the project will increase your customer base and increase revenues. The more you can back up your projections with references to third party sources that support your conclusions the better your application will be received.

Steering Committee ApplicantsFor groups that are not yet incorporated, there is an option to apply as a Steering Committee, defined by USDA as “an unincorporated group of specifically identified Agricultural Producers that lacks a legal structure or identity and is in the process of organizing one of the four program eligible entity types that will operate a value-added venture and will supply the majority of the agricultural commodity for the value-added project.” To apply as a Steering Committee, 100 percent of the group must be Independent Producers.

Market Expansion ProposalsIndependent producer applicants (individuals or multiple-producer entities) seeking a working capital grant of $50,000 or more for a proposed market expansion for (an) existing value-added agricultural product(s) that they have produced and marketed for at least 2 years may submit a business or marketing plan instead of a feasibility study.

PROGRAM PRIORITIES

Small and Medium-Sized Family Farms & Beginning, Socially Disadvantaged, and Veteran Farmers In making grant awards, USDA is required by law to prioritize projects that increase opportunities for (1) small- and medium-sized family farms and ranches, (2) beginning farmers or ranchers, (3) socially disadvantaged farmers or ranchers, and (4) veteran farmers or ranchers.

Family farms are defined as farms in which the members of the family are primarily responsible for daily physical labor and strategic management.

Small farms are family farms that on average generate less than $500,000 in gross annual sales. Medium-sized farms are family farms that on average generate up to $1 million in gross annual sales.

Beginning farmers or ranchers are have operated a farm or ranch for not more than 10 years and are actively engaged in day-to-day farming. Socially disadvantaged farmers and ranchers are those who are members of a group that that have been subjected to racial, ethnic, or gender prejudice because of their identity as members of a group without regard to their individual qualities.

Veteran farmers or ranchers are those who have served in the Armed Forces and who have (a) not operated a farm or ranch or (b) operated a farm or ranch for no more than 10 years.

Though not directed to do so by the farm bill, USDA is also providing priority points (more points than are available to individual farmers or to farm

• Maximum award per project: planning grant, $75,000; working capital grant, $250,000

• Maximum grant length: 3 years. Work on project must begin within 90 days of award

• Grant funds may not be used for repair, acquisition, or construction of a building or facility or to purchase, rent or install fixed equipment

• Cash and/or in-kind matching funds are required (see “match” section)

• USDA’s Rural Business Cooperative Service administers the program and grant applications are first screened through each state’s USDA Rural Development Office

This grant round provides up to $44 million in

funding drawn from a combination of fiscal year 2016 appropriations and 2014 Farm Bill funding.

VAPG QUICK FACTS

groups or businesses) to all farm co-ops and to all mid-tier value chains, regardless of their membership base.In ranking applications, USDA awards 5 points (out of 100 total possible points) for applicants who are from one or more of the priority categories. Up to 5 additional points will be awarded to group projects (majority-controlled producer businesses, co-ops, producer groups) to create or expand opportunities for one or more of the priority categories.

In the event of a tie between two or more applicants, the Administrator will have discretion in breaking ties.

To qualify for priority points, an individual farmer applicant must be the operator of a small or medium-sized family farm or be a beginning, socially disadvantaged, or veteran producer. For group applicants, USDA currently requires that more than 50 percent of the members are operators of small or medium-sized family farms or are beginning, socially disadvantaged, or veteran producers.

(Editorial note – NSAC adamantly opposes the current USDA points, process, and thresholds for awarding priority points and the end run USDA is doing around congressional directives in the farm bill. We continue in our advocacy efforts to try to get this aspect of the program on track.)

Mid-Tier Value ChainsMid-tier value chain projects have a special funding set-aside (see below), and, as noted above, USDA has decided they also receive priority ranking points. The definition of a value-added agricultural product includes an agricultural commodity or product that is aggregated and marketed as a locally-produced agricultural food product.

Mid-tier value chains assist farmers and ranchers who are too large or remote to substantially engage in marketing directly to consumers but too small to profitably engage in high volume, low margin raw commodity production. They are designed to capitalize on the increasing demand for high quality products from family farms adhering to strong environmental and social values.

Farmers can be funded for the development of mid-tier value chains, which are defined as local and regional supply networks (including aggregators and facilitation services) that link independent producers with businesses, cooperatives, or consumers that market value-added agricultural products in a manner that:

• Targets and strengthens the profitability and competitiveness of small and medium-sized family farms or ranches; and

• Includes an agreement from an eligible agricultural producer group, farmer or rancher cooperative, or majority controlled producer-based business venture that is engaged in the value chain on a marketing strategy.

Producer-based food hubs that meet these qualifications are eligible for VAPG awards as part of mid-tier value chain projects.

Applicant ownership of the raw agricultural commodity and value-added agricultural product from raw through value-added stages is not necessarily required, as long as the mid-tier value chain application can demonstrate an increase in customer base and an increase in revenue returns to the applicant producers supplying the majority of the raw agricultural commodity for the project.

Funding Set-Asides By law, there are two 10 percent funding set-aside categories, one for mid-tier value chain projects, and one for projects submitted by beginning or socially disadvantaged farmers or ranchers. The set-asides are intended to ensure that these objectives are more likely to be supported.

The farm bill ends the set-aside on June 30 of each fiscal year so that any funds that are not awarded within the set-aside by that date can be put to use elsewhere.

This year, however, USDA is releasing the request for applications so late in the year that the application due date comes at the same time as the deadline for making awards under the set-aside.

National Sustainable Agriculture Coalition

The delay by USDA has happened repeatedly in recent years and is most unfortunate. Hopefully, in future years the funding availability notice will be out in the winter, when farmers generally have more time to work on proposals, so that decisions can be made in advance of the June 30 cut-off date.

MANDATORY REGISTRATIONS

Before applying, VAPG applicants must obtain a Dun and Bradstreet Data Universal Numbering System (DUNS) number. A DUNS number can be obtained at no cost by calling toll-free to 866-705-5711.

Applicants must also register in the System for Awards Management (SAM) prior to submitting the application. To register, go to https://www.sam.gov/portal/public/SAM.

Both are easy to obtain, but if you do not have a DUNS and a current SAM registration, you need to get started right away, as they take some time to get.

The process to apply for a DUNS takes about one business day, and when you apply you will need to be able to provide contact information, the number of employees, the legal structure of your operation, the year it was established, and the SIC code, which is a U.S. Department of Labor business classification that can be looked up online. When you have this information you can apply for a DUNS online at http://fedgov.dnb.com/webform.

Next, after obtaining a DUNS number, you must register with SAM, which is a government-wide registry for anyone doing business with the federal government. You can begin the SAM process at www.sam.gov, and should have the following information ready: your DUNS number, EIN number, statistical information about your business, and information for electronic transfer of payments. You should plan ahead for the SAM application, because a newly assigned EIN number can take up to 2 to 5 weeks before it is active and valid for the SAM application.

1. Nature of Proposed Venture (up to 30 Points) – Technical feasibility, economic sustainability, demonstration of the potential for expanding customer base, expected increase in revenue returns, etc.

2. Qualifications of Project Personnel (up to 20 Points) – Credentials, education, experience of each person working on the project. If using consultants, they do not necessarily need to be identified beforehand, but the qualifications sought should be described.

3. Commitments and Support (up to 10 Points) – Support from producers, end user buyers, and third party contributors. Includes contracts, letters of commitment, or letters of intent, if any. Cash and in-kind contributions detailed.

4. Work Plan and Budget (up to 20 Points) – Detailed description of all tasks and who will accomplish them. Budget should include detailed breakdown of all estimated costs of project activities.

5. Priority Points (0 or 5 Points for Priority Category Applicants; up to 5 Additional Points for Qualified Group Applicant Types) – If the project if submitted by the operator of a small or medium-sized family farm, or a beginning, socially disadvantaged, or veteran farmer or rancher, or if the proposal is from a farm co-op, or is a mid-tier value chain project, 5 points will be awarded. For group projects, up to 2 points will be awarded if the group has 50% membership from the statutory priority groups, 1 point if the group includes at least two statutory priority groups among its members, and 2 points if the project will increase the group’s membership by at least one statutory priority category. Only farm co-ops, producer groups, or majority-controlled producer businesses are eligible for the full 10 points under this heading.

6. Administrator Points (up to 10 points) – USDA may award up to 10 points to an application to improve the geographic diversity of awardees in a fiscal year.

Applications are awarded points based on six scoring tiers. The maximum number of points is 100. Complete descriptions are in the Federal

Register Notice.

APPLICATION SCORING

1. Invitation for Applications for VAPG published in the Federal Register. (April 8, 2016)

Read the complete Federal Register notice, but be forewarned it is written in bureaucratic language. Be sure to consult with your state USDA Rural Development Office (see step 3) and with NGOs or consultants in your area familiar with the program.

2. Applicants may use USDA’s application template (“Forms & Resources” tab under VAPG title).

State economic development Extension specialists or NGOs with expertise may be able to provide assistance.

3. Draft applications may be sent to RD-State Offices for preliminary review & comment.

Applicants may request technical assistance from their state RD office prior to the application deadline. Take advantage of their assistance and be sure to get a preliminary review and comment on your draft application to avoid problems that may otherwise void your final application.

4. Applications are written and finalized.

As noted previously, USDA offers a simplified application for working capital projects requesting less than $50,000. If the applicant is not applying for a less than $50,000 working capital project using the simplified form, applicants seeking working capital grants must also secure a business plan and independent feasibility study, which must accompany the application. These take time, so must be started immediately. Also note that these documents will not be provided to the project reviewers and thus should be summarized in the text of the application as well as be attached.

5. Application deadlines: June 24 and July 1, 2016.

Applications cannot be faxed or emailed. You must (a) mail the complete application to the State RD Office located in the State where the project will primarily take place, postmarked by or sent overnight by July 1, (b) hand carry your application to a USDA RD field office by close of business on July 1, or (c) submit the application electronically through grants.gov by midnight Eastern Time on June 24. NOTE THE EARLIER ONLINE DEADLINE. If you choose electronic submission, please note that it is highly recommended that you (1) register beforehand to set up an account, and (2) try to file a few days ahead of time because grants.gov is notoriously difficult to deal with if rushing at the last minute.

6. Proposals are reviewed for completeness and eligibility by RD-State offices.

7. Proposals are scored by the State office.

By getting a draft proposal pre-reviewed by the state office you will have a better sense of how your proposal will score, and if there are particular problems that might indicate a lower ranking there may be time to adjust the proposal to gain a better ranking.

8. Proposals are sent to the national office at USDA, which sends each proposal to at least one independent, non-federal reviewer to evaluate and rank. The state office score is then averaged with the independent reviewer score. Priority points are added to the average score.

9. Final scoring. This includes any additional Administrator priority points awarded for geographic diversity.

Be forewarned that those final (up to) 10 points can make a critical difference. If you are in an underserved state, it may work in your favor, and if not, you want to do everything possible to maximize your points on all the other factors.

10. Awards announced. (Expected in September 2016)

2016 VAPG APPLICATION TIMELINE AND CHECKLIST

National Sustainable Agriculture Coalition

VAPG History

The program was first authorized in the 2000 Agricultural Risk Protection Act and was then expanded as part of the 2002 Farm Bill to include inherently value-added

production, such as organic crops or grass-fed livestock, and expanded again in the 2008 Farm Bill to include

locally produced and marketed food products and mid-tier value chains. The 2014 Farm Bill provided $63 million

in mandatory funding over five years, added a new priority category for veteran farmers and ranchers, and

added a revised priority determination process for group applicants. NSAC has advocated for the program since its creation and continues to do so in the context of the

farm bill implementation and in the annual congressional appropriations process. Want to help? Join our action

network on our website!

USDA Rural Development: http://www.rd.usda.gov/programs-services/ value-added-producer-grants, or call 202-690-1374

National Sustainable Agriculture Coalition: http://sustainableagriculture.net/publications/ grassrootsguide/local-food-systems-rural- development/value-added-producer-grants/

The Agricultural Marketing Resource Center: http://www.agmrc.org/

USDA Rural Development State Offices: http://www.rd.usda.gov/contact-us/state-offices

110 Maryland Ave NE, Suite 209Washington, DC 20010

http://sustainableagriculture.net

This guide was produced by

The National Sustainable AgricultureCoalition

MORE INFORMATION AND RESOURCES

Photo credits:Cover - flickr user shreveportbossierAll others - USDA

National Sustainable Agriculture Coalition

Last updated May 3, 2016